Equity investors who cannot leave their money untouched for at least three years should not be in the stock market, a number of fund managers have said.
“I personally think people putting money into equities shouldn’t do it if they’ve got a time horizon of less than three years,” Balanced Equity Management managing director Andrew Sisson said.
“If you plan to take money out in less than three years, you’re running a higher degree of risk than you should be.”
Hyperion Asset Management institutional business director Tim Samway said five years was the true measure.
“The reality is that anybody who has a view shorter than five years shouldn’t be in the stock market,” Samway said.
“The overall volatility of the market means it’s actually not worth investing in it on a very short investment horizon unless you’re a punter. Unless you’re prepared to compare it to a bet at Randwick [racecourse], you shouldn’t be there.”
Samway said heightened market jitters were spurring an increasingly short-term investment view, resulting in a real risk that investors would miss out on gains they’d been positioned for their whole working lives.
“[Advisers] are being pressured by that, by the underlying behavioural biases of clients. We’re seeing it in the funds management industry as generally, financial planners are pressured by clients to withdraw from growth asset classes and put it into cash,” he said.
“For a long-term investor, that’s folly. That’s getting out at the worst possible time. We’ve never seen equities looking so cheap – unbelievably cheap.”
Samway said Hyperion, a high-conviction manager with about $3.2 billion under management, remains fully invested in the stock market.
He said allocations had not changed as a result of the Greek debt crisis or the uncertainty over its resolution – even as Australia’s national savings rate shot to a 30-year high of 10 per cent in response to debt woes in Europe and the United States.
Meanwhile, Sisson unveiled the Franklin Templeton Australian Equity Fund.
Balanced Equity Management, which has about $10 billion under management was acquired in July by Franklin Templeton.
Sisson said the fund was seeded with about $30 million from proceeds of the fund manager’s sale combined with some seed money from Franklin Templeton.
He said the fund aimed to beat the S&P/ASX 100 Accumulation Index over the medium to long term after fees and taxes.
He agreed the market was cheap and said launching the fund now positioned it for an upturn.
“The logical thing to do is buy when the market’s out of favour – but most people don’t,” he said.
